Scrap supply could hit prices

IN FOCUS / NICKEL

Nickel prices are expected to remain subdued through the end of the year, as well as through the next year, in spite of a tight demand and supply situation in 2005 both globally and in India.

According to a report by the Gold Fields Mineral Services, the pattern of nickel prices in the fourth quarter of 2004 has been similar to that in the third and in the first three months of the year.

A price of over $15,000/tonne has proved to be short-lived as prices above this level has led to profit-taking.

Another fall-out would be a boost in stainless steel scrap supply which would in turn lead to substitution pressures. As a result, nickel consumption by the stainless steel sector could come down slightly.

According to the International Stainless Steel Forum, world stainless steel output in the third quarter was up by 9.3 per cent year-on-year to 5.9 million tonne.

The strongest demand growth came from western Europe and Africa followed by Asia.

The cumulative global production was 7.3 per cent higher at 18.2 million tonne.

During December, there have been further gains in London Metal Exchange warehouses with stocks now back above 18,500 tonne, largely believed to have originated from Russian mines.

The increases hammered nickel on LME and cash prices are now around $12,680/tonne.

Following this correction, it is expected that prices may settle down lower in the range of $12,000-13,000/tonne upto the end of 2004. This is compared with last year's average of $13,830.

On the global supply front, the situation is mixed but the market is expected to be tight in the near future.

Australian producer Mincor has upgraded its production forecast for the year ending June 2005 by 30 per cent to 11,000 tonne.

In the following year, its production could be 15,000 tonne of nickel in concentrate.

Problems continue to affect Minara Resources with production in the December quarter at the Murrin Murrin nickel laterite plant in Western Australia expected to be down 25 per cent.

Production at Rio Narcea's Aguablanca's mine in Spain will start operations this month.

PT Antam has ceased mining operations due to reserve exhaustion although the processing of old stockpiled material will continue.

In addition, the Canadian Inco has announced that initial financing for the Goro project should be completed before Christmas.

The plant, which will have an eventual capacity of 60,000 tonne per year (TPY) and 4,500 TPY of cobalt, is expected to come onstream in September 2007.

The first production of finished nickel from Voisey's Bay should hit the market in the first quarter of 2006, following the first shipment of concentrate in November 2005.